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EXHIBIT 28.1
ANNUAL REPORT ON FORM 11-K
OF THE EMPLOYEE STOCK PURCHASE
PLAN FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996
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EXHIBIT 28.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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Commission file number 33-43597
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A. Full title of the plan and the address of the plan, if different from
that of the issuer named below.
Sofamor Danek Group, Inc. Employee Stock Purchase Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Sofamor Danek Group, Inc.
1800 Pyramid Place
Memphis, TN 38132
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REQUIRED INFORMATION
(a) Financial Statements
Page
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Report of Independent Accountants 1
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
Schedules I, II and III are not required or are not applicable, or the
required information is shown in the financial statements or notes
thereto.
(b) Consent of Coopers & Lybrand, Independent Accountants 8
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Committee of the
Sofamor Danek Group, Inc. Employee Stock
Purchase Plan
We have audited the accompanying statements of net assets available for benefits
of the Sofamor Danek Group, Inc. Employee Stock Purchase Plan (the "Plan") as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for benefits for the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Plan Committee.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1996 and 1995, and the changes in net assets available for benefits
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
March 10, 1997
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1996 and 1995
ASSETS 1996 1995
Cash $ 1,568 $ 1,113
Employee contributions receivable 45,650 33,897
Employer contributions receivable 6,847 5,085
Investments, cost of $180,955 and $142,958 at December 31, 1996 and
1995, respectively
181,048 157,623
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Total assets 235,113 197,718
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LIABILITIES
Payable due Sofamor Danek Group, Inc. 52,490 39,044
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Net assets available for benefits $182,623 $158,674
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The accompanying notes are an integral part of these financial statements.
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Additions to net assets:
Net appreciation (depreciation) in investments $ 22,133 $114,140 $(21,167)
Employee contributions 167,338 129,940 153,308
Employer contributions 25,101 19,491 22,996
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Total additions 214,572 263,571 155,137
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Deductions from net assets:
Stock distributions to participants 190,496 231,148 191,798
Cash distributions to participants 127 984 422
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Total deductions 190,623 232,132 192,220
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Net increase (decrease) 23,949 31,439 (37,083)
Net assets available for benefits:
Beginning of year 158,674 127,235 164,318
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End of year $182,623 $158,674 $127,235
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The accompanying notes are an integral part of these financial statements.
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION AND BASIS OF PRESENTATION:
PLAN DESCRIPTION
In November 1991 Sofamor Danek Group, Inc. (the "Company") adopted the
employee stock purchase plan to provide employees the opportunity to
purchase shares of the Company.
All eligible employees may participate in the Plan six months after
their date of employment. Total participants of the Plan at December
31, 1996 and 1995, were 125 and 95, respectively. The employee and
Company contributions are used to purchase shares of common stock of
the Company at the fair market value on the last business day of each
quarter and the related stock certificates are issued to the
participants within 60 days after the end of each calendar year. An
employee may discontinue his participation in the Plan at any time
upon written notice to the Company. A participant may thereafter
withdraw common shares allocated to his or her account. Cash dividends
or stock dividends, if any, are credited to each participant's account
in proportion to the number of common shares in his account.
Participants are entitled to vote the shares held in their account.
The Board of Directors of the Company (the "Board") may amend or
terminate the Plan, provided, no amendment shall be made, without
first obtaining the approval of the Company's shareholders, to (1)
increase or decrease the number of shares approved for the Plan
(except to reflect a stock split or stock dividend), (2) decrease the
option price per share, (3) change the class of employees eligible to
participate in the Plan, or (4) materially increase the benefits
accruing to participants under the Plan. In the event that the Board
elects to terminate the Plan all amounts will be carried forward into
each participant's account for disposition as determined by the Board.
Following the end of each calendar quarter, the Custodian provides a
statement to each participant which details all activity in the
participant account for that quarter. The custodian provides a
statement providing any necessary tax reporting as required by law.
The 60,000 shares of Common Stock reserved for the Plan were
registered under the Securities Act of 1933 with the Securities and
Exchange Commission on October 25, 1991.
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. PLAN DESCRIPTION AND BASIS OF PRESENTATION, CONTINUED:
PLAN DESCRIPTION, CONTINUED
During 1996, the Board of Directors and stockholders of the Company
approved an amendment which allows the Plan to continue in force until
all of the Plan shares have been sold or, if earlier, October 31,
2006.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires the Plan Committee to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of additions and
deductions from net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVESTMENT VALUATION AND INCOME RECOGNITION
The common shares of the Company are valued at fair market value
measured by quoted market prices in an active market. Purchases of
common stock are recorded on a trade-date basis. Thus, the valuation
of the Plan's investments are subject to fluctuations in the quoted
market price for the Company's common stock.
The Plan presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
EMPLOYEE CONTRIBUTIONS
The employee may contribute to the Plan by requesting that the Company
withhold up to 5% of the participating employee's gross earnings (as
defined by the Plan).
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
EMPLOYER CONTRIBUTIONS
The Company is obligated to make contributions to the participant's
account in the Plan in an amount equal to approximately, but not more
than, 15% of the employee's contribution. The participants fully vest
in the employer contribution at the end of each calendar quarter.
FEDERAL INCOME TAX STATUS
The Plan qualifies as an Employee Stock Purchase Plan as defined in
Section 423 of the Internal Revenue Code of 1986 as amended.
A participant cannot dispose of his stock within two years after the
grant of an option or within one year after the date of exercise of
the option (the "Prohibited Sale Period") without adverse tax
consequences. The Company has been advised that for federal income tax
purposes, a participant who sells his stock within the Prohibited Sale
Period will recognize ordinary income with respect to the shares sold
in an amount equal to the difference between the fair market value on
the option date and the option price for the shares. The ordinary
income will be recognized regardless of whether any gain or loss is
realized from the sale of the stock. This ordinary income is
considered compensation and is subject to federal and state
withholding, and social security withholding (if applicable).
The tax basis of the participant's shares is equal to the fair market
value of the stock on the exercise date, plus any ordinary income
recognized by the participant. Thus, for a sale during the Prohibited
Sale Period, any excess of the sale proceeds received upon disposition
of the shares by the participant over the tax basis in such shares
sold is considered capital gain. Similarly, if the tax basis of the
participant exceeds the sales proceeds received by the participant,
after adjustment for any required recognition of ordinary income, then
the excess is considered a capital loss. If the participant recognized
ordinary income during the Prohibited Sale Period, then the Company
has a matching deduction equal to the amount of ordinary income
recognized by the participant.
If the stock is sold after the Prohibited Sale Period for more than
the option price, a portion of the gain realized (but only to the
extent of the gain realized) will first be taxed as ordinary income in
an amount equal to the excess of the fair market value of such stock
on the option date over the option price. Any excess gain will be
considered long-
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SOFAMOR DANEK GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FEDERAL INCOME TAX STATUS, CONTINUED
term capital gain. If the stock is sold for less than the option price
after the Prohibited Sale Period, no ordinary income will be
recognized and the resulting loss will be considered long-term capital
loss. If the participant recognized ordinary income or capital gain
from a disposition after the Prohibited Sale Period, the Company
receives no deduction.
INVESTMENTS
The Plan's investments consist of 5,936 and 5,555 shares of Sofamor
Danek Group, Inc. common stock at December 31, 1996 and 1995,
respectively.
PAYABLE DUE SOFAMOR DANEK GROUP, INC.
As of December 31, 1996 and 1995, the Plan recorded a payable to the
Company of $52,490 and $39,044, respectively, for the fourth quarter
purchases of common stock.
3. ADMINISTRATION OF PLAN ASSETS:
The Plan provides that a Committee (the "Committee"), appointed by the
Board, will administer the Plan. Members of the Committee may not
participate in the Plan.
The trust department of SunTrust Bank in Atlanta, Georgia, is the Plan
custodian.
The Company pays all commission, fees and expenses incurred in
connection with the acquisition of shares under the Plan and all other
expenses of administering the Plan.
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Sofamor Danek Group, Inc. Employee Stock Purchase Plan on Form S-8 (File No.
33-43597) of our report dated March 10, 1997 on our audit of the financial
statements of Sofamor Danek Group, Inc. Employee Stock Purchase Plan as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996, which report is included as an exhibit to Form 10-K.
COOPERS & LYBRAND, L.L.P.
Memphis, Tennessee
March 21, 1997
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sofamor Danek Group, Inc. Employee Stock Purchase Plan
(Name of Plan)
Date: March 21, 1997 /s/ J. Mark Merrill
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J. Mark Merrill, Treasurer
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